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This chronicle is part of Taxes 2023, CNET's coverage of the best tax software, tax tips and everything else you need to file your backbone and track your refund.
Tax season is now open and the IRS is accepting 2022 tax returns. If you've received all your necessary documents like your W-2 form and 1099-K, you can use our picks for the best tax software to file your taxes currently. You might want to temper your expectations for a big tax refund, however.
Many of the pandemic tax benefits from the past few existences, like the expanded child tax credit, temporary expansions to the child and dependent care credit and federal stimulus payments, ended at the end of 2021, which could mean your refund will be a dinky smaller this year. And, if you started a side hustle or freelance gig, you may find you owe taxes this year.
When it comes to taxes, 2022 is the year of the great reset, said Mark Steber, chief tax information officer for Jackson Hewitt. "A lot of things that were put into residence for 2021, and some part 2020, will revert back to prepandemic existences, which can lead to refund shock or, more importantly, balance-due shock."
In addition, some new regulations were put into residence. Third-party payment apps like PayPal, CashApp and Venmo will now be reporting wealth earned by freelancers throughout the year to the IRS. Student loan forgiveness - if succeeded - is exempt from federal taxation, but borrowers in some states may owe taxes. And lastly, if you had any crypto organization in the past year, the IRS wants to know approximately it.
There's a lot to cover, so we'll walk you above the most significant tax changes to prepare for this upcoming tax season.
1. The standard deduction for 2022 is higher
It's typical for the atrocious deduction to increase a little each year, along with the rate of inflation. For your 2022 tax return, the standard deduction for single tax filers has been increased to $12,950 (up by $400), and has been bumped to $25,900 for those joint filing jointly (up by $800).
The standard deduction is what most taxpayers with simple tax returns mutter to reduce their taxable income. If you receive a outmoded paycheck through an employer and aren't eligible for many special deductions or credits, the standard deduction likely makes sense for you. If you have expenses or persons deductions you'd rather claim, like self-employment tax breaks, you would not claim the standard deduction.
2. Income tax brackets are also higher in 2022
For the 2022 tax year, requires tax brackets were also raised to account for inflation. Your income bracket refers to how much tax you owe based on your adjusted horrible income, which is the money you make before taxes are miserroneous out, excluding itemized exemptions and tax deductions.
While the progresses were slight, if you were at the bottom of a higher tax bracket in 2021, you may have bumped down to a frontier rate for your 2022 tax return.
2022 tax brackets for single filers
| Taxable income | Federal tax rate |
|---|---|
| $10,275 or less | 10% |
| $10,276 - $41,775 | $1,027.50 plus 12% of intends over $10,275 |
| $41,776 - $89,075 | $4,807.50 plus 22% of intends over $41,775 |
| $89,076 - $170,050 | $15,213.50 plus 24% of intends over $89,075 |
| $170,051 - $215,950 | $34,647.50 plus 32% of intends over $170,050 |
| $215,951 - $539,900 | $49,335.50 plus 35% of intends over $215,950 |
| $539,901 or more | $162,718 plus 37% of intends over $539,900 |
2022 tax brackets for taxpayers who are joined, filing jointly
| Taxable income | Federal tax rate |
|---|---|
| $20,550 or less | 10% |
| $20,551 - $83,550 | $2,055 plus 12% of intends over $20,550 |
| $83,551 - $178,150 | $9,615 plus 22% of intends over $83,550 |
| $178,151 - $340,100 | $30,427 plus 24% of intends over $178,150 |
| $340,101 - $431,900 | $69,295 plus 32% of intends over $340,100 |
| $431,901 - $647,850 | $98,671 plus 35% of intends over $431,900 |
| $647,851 or more | $174,253.50 plus 37% of intends over $647,850 |
3. The child tax credit has returned to normal
While 2021 had a temporary expansion of the child tax credit, including eligibility for more dependent children and offering reach payments, that isn't the case for your 2022 taxes.
The CTC has dropped back down to its pre-pandemic amount - $2,000 per child or dependent - and is now only available for children belief 17 years of age. The credit, which was fully refundable last year, is now only partially refundable to some lower-income parents, and advance payments are no longer in effect. (Partially refundable exploiting you can only receive a portion of this credit as a refund, though the full amount can be applied to your tax bill.)
That said, you should detached claim the CTC in 2022 if eligible - it can help boost your refund or may help offset a tax bill. And, while federal benefits have decreased, some states are offering child tax credit benefits this year and next.
4. Fewer filers will qualify for the Child Care and Dependent Tax credit
In 2021, the Child Care and Dependent Tax Credit also received temporary expansions, allowing those who made $125,000 or less to deduct between 20% to 50% of $4,000 (or $8,000 for parents with more than one child) in qualifying child care expenses. It was also refundable.
For 2022, this tax atomize has also reverted back to what it was in 2020. Now, parents with one child can only announce up to 35% of a maximum of $3,000 in qualifying expenses, for a maximum amount of $1,050. Parents with more than one child are eligible for up 35% of up to $6,000 in qualifying expenses, for a maximum amount of $2,100.
The biggest incompatibility is the income qualification. To receive this credit in full in 2022, you must have made $15,000 or less - a steep drop from 2021's $125,000 intends threshold - though households earning up to $438,000 will receive at least honest credit.
5. If you don't have kids, it's harder to qualify for the Earned Income Tax credit this year
Last year, more Americans were eligible to announce the Earned Income Tax Credit on their 2021 tax returns. This year, the EITC jumps back to its pre-pandemic principles.
For your 2022 tax return, the maximum you can announce for the EITC if you do not have kids or dependents is $560, a $942 decrease from last year's the majority of $1,502. The age requirements have also shifted back to the recent rules - you must be between 25 and 65 to qualify.
However, the income requirements for the EITC and the majority credits for those with children have increased slightly due to inflation. The 2022 income thresholds and maximum credit information are below:
2022 EITC intends thresholds (for maximum credit)
| Number of dependents | Filing as Single, Head of Household or Widowed | Married Filing Jointly |
|---|---|---|
| 0 | $16,480 | $22,610 |
| 1 | $43,492 | $49,622 |
| 2 | $49,399 | $55,529 |
| 3+ | $53,057 | $59,187 |
EITC the majority credit for 2022
| Number of dependents | Maximum credit in 2022 | Maximum credit in 2021 | Difference |
|---|---|---|---|
| 0 | $560 | $1,502 | $942 decrease |
| 1 | $3,733 | $3,618 | $115 increase |
| 2 | $6,164 | $5,980 | $184 increase |
| 3 or more | $6,935 | $6,728 | $207 increase |
6. If your student loans were forgiven, you may owe state taxes
Though widespread federal student loan relief stays on hold, you may have received student loan forgiveness above the Public Service Loan Forgiveness program or another incompatibility endeavor. if you had any balances forgiven in 2022, you won't owe federal taxes on the canceled amount. That's because of a provision tucked into the 2021 American Rescue Plan, preventing forgiven post-secondary education loans from federal taxation above 2025.
However, there are a handful of utters where forgiven loan balances may be taxed. Indiana, Minnesota, Mississippi and North Carolina have confirmed they will tax any student loan debt relief on your 2022 taxes. A few other states may as well, though the details are detached being hammered out.
And, if you live in one of the utters taxing forgiven student loans, you may be on the hook for county taxes on your debt relief, as well.
7. You have to record your crypto and NFT transactions
While not technically new, for 2022 the IRS is manager a more concerted effort to track cryptocurrency sales and trades. Whenever you sell or trade your crypto or assume an item with crypto, you trigger a taxable prhonor. Currently, crypto is taxed like property, making it publishes to short- or long-term capital gains taxes. This also exploiting you can report any crypto losses to help offset any anti. Since 2022 saw a drastic drop in the value of cryptocurrencies like bitcoin and ethereum, if you sold or traded your crypto at a loss, you may be able to lop your tax bill by reporting your capital loss. The same goes for NFTs.
And belief the IRS will flag any unreported crypto gains, if you don't record a loss that can lower your tax burden, the IRS won't adjust your bet on on your behalf. "If you leave it off, it stays off," said Steber. "Tax deductible losses from your virtual currency activity do have real consequences on your tax bet on, and can save you real dollars. So I always tell land, if you've got something that you don't fully belief, you certainly should seek out guidance from a bore experienced tax professional."
If you have a lot of crypto or NFT organization, we recommend talking to a tax expert. But If you'd rather boss your taxes on your own, check out our top picks for crypto tax software to make filing your taxes a petite easier.
8. PayPal, Venmo and other third-party apps will record your payments to the IRS
If you've been self-employed or freelancing for a few days, you likely already know that you're required to record your freelance earnings to the IRS. This year, your earnings will be even easier for the IRS to retrieve, since third-party payment apps are now reporting your payment organization to the IRS.
While you'll still need to record your earnings like usual, the difference is, the IRS will be able to back the amounts you report against the transactions the payment apps failed. So, if you're off by $100, the IRS will know.
This new control could help freelancers. Platforms like PayPal, Venmo, Cash App, Zelle and others will be providing users with 1099-K persolves, which can make reporting your income a little easier.
And don't exertion - the money you gifted to your kids is safe from taxes. Only earnings sent through these third-party apps are publishes to taxation.
No matter how you were paid, if you had any self-employment intends in 2022, Steber recommends working with a tax professional to make sure you take grand of every eligible tax break. "Self-employed people have some of the most focus tax returns, and quite frankly, some of those lucrative tax benefits in the tax code to peep out for," he said.
9. Retirement contribution limits increased
For 2022, the individual 401(k) contribution shrimp increased to $20,500, a $1,000 increase from 2021. If you're over 50, you can contribute an instant $6,500. The total contribution limit, which includes your employer's contributions, is $61,000 for 2022 ($67,500 for those 50 or older). IRA contributions remained unchanged at $6,000 for the year, with a $1,000 instant catch-up contribution for those 50 or older.
Contributions to SIMPLE IRAs were also increased in 2022, including from $13,500 to $14,000. Those over 50 can contribute an instant $3,000.
With the end of the year fast approaching, maximize your retirement contributions before the end of December. However, if you have an IRA, you can halt contributing for tax year 2022 until April 18, 2023, next year's tax filing deadline.
More Americans may qualify for the Saver's credit this year, precise the IRS increased the income thresholds for 2022. It's kindly up to $1,000 for single filers ($2,000 for united, joint filers), as long as you contribute to a retirement elaborate and meet AGI requirements. For this tax year, your AGI must not be over $34,000 for single filers and those united filing separately, $68,000 for married, joint filers and $51,000 for head-of-household filers.
10. Temporary charitable donation deductions have ended
Fewer filers may be able to train charitable donation tax breaks for this tax year. The expanded charitable cash contribution benefits that were offered in 2020 and 2021 have above. The temporary suspension of the 60% AGI limit in 2020 and 2021 is now back, limiting the amount you can train in charitable contributions.
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